CFPB Warns U.S. Financial Firms About Contractors

U.S. financial institutions
may be held accountable for the actions of the companies they
contract with for services such as telemarketing or product
development, the new U.S. Consumer Financial Protection Bureau
said on Friday.

U.S. financial institutions
may be held accountable for the actions of the companies they
contract with for services such as telemarketing or product
development, the new U.S. Consumer Financial Protection Bureau
said on Friday.

The CFPB, which was created by the Dodd-Frank financial
reform law and is almost a year old, released a bulletin warning
financial companies that they must thoroughly vet and monitor
contractors, and can be held accountable for contractors' legal
violations.

"Consumers are at a real disadvantage because they do not
get to choose the service providers they deal with -- the
financial institution does," CFPB Director Richard Cordray said
in a statement.

The CFPB was created to closely police all financial
companies, not just traditional banks, to make sure that they're
treating consumers fairly.

The CFPB has ratcheted up its activity in recent months,
putting the debt collection and payday lender industries on
watch. Those industries previously did not have a strong federal
regulator.

It has also begun on-site supervision of financial companies
and is starting to file friend-of-the-court briefs in cases
around the nation that involve disputes over consumer lending
laws.

The CFPB's bulletin on Friday laid out what financial
companies should do to ensure that their business arrangements
with contractors do not pose unwarranted risks to consumers.

The steps include due diligence to verify the contractor is
aware of relevant laws, reviewing the service provider's
internal controls and training materials, and quickly addressing
any problems that come up during the monitoring process.
(Reporting By Karey Wutkowski; Editing by Steve Orlofsky)